Utopia Press - Amazon Trends 2019 (article)

Utopia Press is a LinkedIn Pilot Series engaging at the intersection of tech, business and the future.

This article was first published on December 31st on Medium, in the Future Sin publication.

Amazon appears to be the winner of the FAANG stocks, which has seen a major correction the Q4 of 2018 on the stock market. Amazon’s place as an innovator remains solid with several initiatives to increase its footprint both in familiar retail and in emerging sectors for it such as advertising, healthcare, and artificial intelligence.

Let’s review of some of the trends.

1. Amazon needs to Increase its Brick-and-Mortar Footprint

Amazon will expand its physical retail footprint in 2019 both with Whole Foods expansions (and its 2-hour Prime Now delivery service) and more hybrid AmazonGo stores in more American cities.

At the pace Alibaba has expanded into physical retail and with Walmart saying that 140 million customers shop its stores weekly, and 90 percent of Americans today live within 10 miles of one of its locations. Amazon needs to keep pace in the real world as well.

In 2019, we could witness several hundred new AmazonGo and Whole Food stores in strategic locations bring the smart store of the future live in North America.

2. Amazon Alexa enters Prime Time

Alexa devices in the smart home and voice-controlled gadgets, smart plugs and robotics along with consumer products in general are a huge growth factor for Amazon. In fact smart-speaker penetration circa 2020 hits more mainstream adoption.

According to a series of reports from RBC Capital Markets analysts released in December, the near doubling of the adoption rate for smart speakers in the U.S. was driven by growth in both Alexa and Google Home devices, yet Alexa Skills ecosystem is so much more actionable for 3rd party apps and partnerships, even if Google assistant is smarter in natural language processing.

Alexa is likely to be a $20 Billion industry for Amazon by 2022, up considerably from former estimates. Moreover, RBC thinks Alexa would generate $18 billion to $19 billion in total revenue by 2021 — or ~5 percent of Amazon’s revenue — through a combination of device sales, incremental voice shopping sales and other platform revenues.

3. Amazon’s Growth in Digital Advertising will be Considerable in 2019

With Facebook in turmoil, many brands are moving their digital advertising efforts to Amazon. With more traffic and insights it only makes sense that Amazon’s growth in digital advertising will continue to scale quite well in the next five years until it might even become a major player.

With Amazon increasingly taking on Google in artificial intelligence and voice search, it’s clear Amazon could gradually take away marketshare from Google in the lucrative digital advertising industry. This is only since Amazon Prime video is likely to mature radically in its head-to-head competition with the likes of Netflix, Disney, Hulu and others.

4. Amazon’s Marketshare of U.S. E-commerce Posts Solid Growth

In the US, Amazon will close out the year nabbing nearly half of all online sales, according to analysis by Emarketer, up from a 43.5% in 2017.

Even with narrow margins due to accelerating logistics costs, Amazon will generate $258.22 billion in online retail sales in the US by the end of the year, a staggering increase of almost 30% from the year prior. It’s Prime Day grew, though not at the pace of Single’s day (double 11) we’ve witnessed in Asia.

5. Prime Ecosystem Will be Key

Amazon likely has in the area of 110 million Prime Members as of the start of 2019. They are likely to eventually roll-out a Prime Health subscription that will encompass many digital health services sometime in the future as their stealth health-tech division called “1492” improves its offering.

While the subscription revenue of Prime members is a cash-cow to be sure, Amazon is failing to encompass online to offline (O2O) at the rate of Chinese E-commerce innovators. Meanwhile, Alibaba is becoming Amazon in the Cloud and with smart speakers at a faster rate than Amazon is adopting Chinese innovation best practices.

6. Amazon as a Future Store Innovator

Amazon will be able to scale AmazonGo cashierless convenience to a variety of different retail physical store formats. Amazon’s experimentation with different sizes of stores will be key as well as its new 4-Star concept. Amazon is showing while cautious, it is seriously considering the best way to roll-out physical stores to augment its brand and customer experience touchpoints.

As for grocery market share, Amazon’s Whole Foods is pretty small — in the area of just 2% in the United States. In terms of grocery delivery, Amazon is light-years behind China and even parts of Europe with both convenience and adoption rates.

7. Amazon could Spin-Off AWS as a Separate Entity in 2019

For increased profitability Amazon’s cloud unit of Amazon Web Services could be spun out as a separate entity. AWS is practically a monopoly in the business Cloud space and now even is a leader in blockchain-as-a-service and the deepest features in the game.

AWS as a separate publically traded company on Wall Street could do exceedingly well. AWS is already one of the cash engines of Amazon’s innovation and R&D patent machine ecosystem.

8. Amazon’s Search for a HQ2 Appears to have been a PR Stunt

All things considered Amazon’s RFP of American cities to land its next headquarters appears to have been part scam, part publicity stunt. It ended up two winners and one consolation prize were picked instead.

The search for a “HQ2” was quite a news spectacle of 2018 a year that saw the battle of misinformation deteriorate the quality of access to objective information considerably. How Amazon hacks PR and spends a lot on advertising itself shows in part the future of how American media could function as it seeks to augment consumer convenience on multiple fronts.

9. Amazon Workers Push for Unionization

It’s a badly kept secret that Amazon doesn’t treat it’s lower labor force all too well. In 2019 there will be more news about this, people are not robots and Amazon should stop treating them as such. Realistically, Amazon grew too fast in 2018. Amazon’s global workforce reached more than 613,000 employees worldwide according to its latest quarterly earnings report. With over 100,000 temporary workers.

Amazon’s workforce more than doubled over the last 3 years, perhaps they deserve some unionized protection. The degrading working conditions and low pay of Amazon’s lower-end workforce is well documented and only going to get more of the limelight until conditions improve.

10. Amazon moves away from Unprofitable ‘CRaP’

Amazon in 2019 will be moving away from unprofitable items such as bottled water and snacks. CRaP stands for can’t realize a profit and Amazon appears serious not to deal with such items anymore. Amazon wants customers to buy less “CRaP” online.

Items sold for less than $15 like soda, snacks and bottled water fall into this category and impact Amazon’s margins. Amazon’s CRaP revolution means it is eliminating some of the items and working with manufacturers or vendors to repackage others so they’re more profitable to sell online.

11. Amazon gains Top Spot as Most Valuable Public Company

On January 7th, 2019 after the warning from Apple, Amazon has gained the top spot in market cap over competitors Microsoft, Alphabet and Apple. While the stock market is volatile, Amazon’s market value is now about $790 billion and now edges Microsoft.

Stay turned for more Amazon trends, I will be updating this list in real-time. What trends of you noticed besides an increasing Prime membership fee?